Yesterday, q.beyond released its Q2/H1 report, showing ongoing operational improvements with adj. sales growth of 2% and as well as significant margin improvements. In detail:
Q2 '25 sales increased by 2% (adj.) yoy to € 44.4m, while the reported yoy change was -6.1% following the communicated accounting change this year in accordance with IFRS 15. As in Q1, this was again driven by the Consulting segment, which showed 12.0% yoy sales growth to € 15.2m. This came with a further improved profitability, visible in the segment's 15.0% gross margin (+8.3pp yoy) following an increased near- and off-shoring ratio of 17% (+5% yoy; FY25 target: 20%) as well as an improved utilization. Reported Managed Services sales on the other hand decreased 14.9% yoy to € 22.8m mainly due to the aformentioned accounting change. Yet, the segment margin rose to 22.1% (+1.4pp yoy) resulting in an overall gross margin of 19.7% (+3.0pp yoy; € 8.7m gross profit).
On this basis, Q2'25 EBITDA increased disproportionately by 24.2% yoy to € 2.7m thanks to ongoing operating leverage, efficiency gains and despite one-offs connected with internal projects (SAP integration, new time recording system; total FY25e costs: € 1m).
Next to the operating results, QBY announced that it has received the funds from the Plusnet transaction (€ 8.6m), which were directly reinvested to reduce trade payables and other liabilities. On this basis, a FCF figure that can act as a comparable is hard to find due to this one-off. Mind you, QBY will have to pay c. € 3.6m taxes during the remainder of FY25 in connection with the transaction.
Guidance confirmed. Against the backdrop of the sound release management confirmed the FY outlook of € 184-190m sales, € 12-15m EBITDA as well as sustainably positive net income and FCF, which appears totally sensible in our view given the release as well as the seasonally strong Q4 still ahead.
M&A pending. CEO Rixen reiterated that QBY is currently in advanced negotiations for a potential M&A deal which is likely to by modeled like the logineer transaction (e.g. JV with industry partner). The CEO further underscored that targets should be in the € >10m and 10% EBITDA margin ballpark. In our view, it is also likely that targets will increase public sector exposure (i.e. energy, healthcare). Mind you, that future M&A is not included in our calculations.
Reiterate BUY with an unchanged PT of € 1.30 based on DCF.
